The rules of B2B marketing are constantly changing. What worked yesterday won't necessarily work today. . .or tomorrow. This blog presents information, opinion, and speculation about where B2B marketing is headed.

Saturday, December 29, 2012

This will be my last post for 2012, and I want to thank everyone who has spent some of his or her valuable time reading this blog. I hope that you have found the content here to be both thought-provoking and useful.

Thanks to analytics, I can see how many times each of my posts have been viewed. I thought this would be an appropriate time to share which posts have been most widely read. This ranking is based on cumulative total reads, and therefore older posts obviously have a built-in advantage.

So, in case you missed any of them, here, in order, are the four most popular posts.

Use an Importance-Performance Matrix to Get Marketing and Sales Talking - This post explains how to use an importance-performance matrix to capture the degree of agreement or disagreement between marketing and sales regarding key demand generation activities. The matrix requires marketers and salespeople to evaluate an activity along two dimensions - how important the activity is, and how well the company is performing the activity. An importance-performance matrix can reveal where significant gaps exist between marketing and sales. It won't tell you how to resolve conflicts between marketing and sales, but it will identify the issues you need to address.

Stop Depending on Your Salespeople to Generate Leads- This post explains why B2B companies should not rely primarily on their salespeople to generate new sales leads. Depending on sales reps to generate leads is a long-standing practice in many B2B companies, but changes in the attitudes and behaviors of business buyers make this practice less and less effective.

Stop Trying to Measure Marketing ROI- For the past several years, CEO's and CFO's have been demanding greater accountability from the marketing function, and they have been pressing marketers to prove the value of their activities and programs. In this environment, return on investment has become the "gold standard" for measuring marketing performance. This post explains why you can't use ROI to measure the value of every marketing activity.

It's Time to Fix the Marketing Supply Chain- Marketers are facing tremendous pressures to drive increased revenues and maximize the return produced by every dollar invested in marketing. So, it's understandable that they focus most of their attention on developing more effective marketing campaigns, creating more compelling content, and generating more sales leads. This post explains why the marketing materials supply chain represents a large, and largely untapped, source of both cost savings and revenue-enhancing improvements.

Sunday, December 23, 2012

Early in my business career, I was privileged to have a great B2B sales mentor. I met William in 1988 and interacted with him frequently until his retirement in 1995.

William sold printing presses to commercial printing companies and businesses that had internal printing departments. The company that William worked for was (and is) highly respected within the printing industry, and William was a very successful salesperson.

Early in our relationship, William told me that one important key to his success was identifying which prospects in his territory were ready to engage in a serious evaluation process that would lead to a buying decision. William also told me that, at any given time, only about 10% of the prospects in his territory would fit this description. William realized that he could use his time more effectively and close more deals if he could consistently identify which prospects were ready to begin an "active buying cycle." So, William spent a significant amount of time "taking the pulse" of his prospects.

How did he do this? Well, he spent three or four days of almost every week visiting prospects. Sometimes, he would make appointments, but frequently, he would just drop in. In most cases, the business owner or another senior manager was willing to spend thirty minutes or an hour with William, even when he showed up unexpectedly.

During these visits, William and his prospects would discuss a range of topics - what was happening in the prospect's business and in the overall printing industry and, most importantly, any issues or problems the prospect was having with his equipment. Through these visits, William could get a pretty good idea of which prospects were ready to have a meaningful conversation about buying new equipment. When he identified these "sales-ready" prospects, William would move to a more focused selling process.

I frequently write in this blog about how B2B buyers have changed and why these changes require a new approach to demand generation. So, it would be easy for me to devote this post to a discussion of why William's approach won't work in today's environment. But, as I think about what William taught me, I'm struck more by what hasn't changed.

In 2013, as in 1990, B2B companies will need a way to determine which prospects are ready to begin a serious sales conversation . . . and which ones aren't.

In 2013, as in 1990, B2B companies will need to "stay in touch" with prospects who aren't ready to begin a serious buying process . . . because some day they probably will be ready.

In 2013, successful demand generation will be more about demonstrating value and providing prospects the information they need to make a sound buying decision than about "persuading" an unprepared or reluctant prospect to buy. And, this was largely true in 1990.

The B2B marketing and sales landscape has changed, and the new rules of B2B demand generation do require different tactics and methods. I don't believe that William's tactics will work as well today as they did in the 1980s and early 1990s, but his objectives are just as valid now as they were then.

Sunday, December 16, 2012

Advocates of inbound marketing frequently assert that inbound sales leads cost less to acquire than outbound leads. The research usually cited to support this claim is the annual inbound marketing survey conducted by HubSpot. For example, The 2012 State of Inbound Marketing study reported that companies who spend more than 50% of their lead generation budget on inbound marketing programs experience a 61% lower cost per lead than companies who rely primarily on outbound marketing. This finding has remained very consistent from year to year in the HubSpot research.

Measuring the costs of acquiring leads through inbound and outbound marketing channels is important, but that information alone won't tell you whether inbound marketing or outbound marketing is more valuable for your business.

To get an accurate picture of how well any lead source is performing, you also need to know what quality of leads the source is producing. In this context, lead quality refers to the likelihood that a lead will actually make a purchase and become a customer. To incorporate lead quality into your evaluation, you need to use lead converstion rates to translate lead acquisition costs to the customer level.

I can illustrate how lead conversion rates impact lead costs with a simple example. The table below compares the acquisition costs of inbound vs. outbound leads at various stages of the lead-to-revenue cycle.

The cost-per-inquiry values used in the table are based on recent research by SiriusDecisions. The conversion rates in the table for inbound leads are the overall conversion rates SiriusDecisions says are achieved by the average B2B company. For illustration purposes in this example, I'm assuming that outbound leads convert at slightly higher rates than inbound leads - 2 percentage points at each lead stage.

As the table shows, the cost-per-inquiry for inbound leads is significantly lower than for outbound leads. At $25.00 per inquiry vs. $41.50 per inquiry, inbound leads are about 40% cheaper than outbound leads. However, when measured on a "per new customer" basis (which is the most important number), outbound leads actually cost about 3% less than inbound leads.

I am not suggesting that outbound marketing is "better" than inbound marketing. The lead conversion rates used in my example are for illustration purposes only. In fact, research by SiriusDecisions indicates that inbound leads cost less and have higher conversion rates, on average, than outbound leads. The point here is that you can't evaluate the performance of inbound vs. outbound marketing until you measure lead acquisition costs at the customer level.

Sunday, December 9, 2012

Starting a content marketing program from scratch can feel like an overwhelming task. Content marketing differs from traditional marketing in several fundamental ways, and it will require you to develop and field a very different portfolio of marketing assets.

In this series of posts, I'm describing three preliminary steps that will make the content development process more manageable. The first step is to identify your core customer value propositions because they define the central messages that your content resources need to communicate. The second step is to develop buyer personas because they provide the information you need to make your content resources relevant to your potential buyers.

The third preliminary step is to audit your existing inventory of content resources. A thorough content audit serves two important functions. First, it enables you to create a complete and accurate record of your existing content resources. In my experience, most marketers don't have a complete picture of what content resources they already have. Second, a content audit can be used to identify where gaps exist in your content portfolio, which helps you determine where to focus your content development efforts.

There are three basic steps involved in performing a comprehensive content audit. The first is to document basic information about each of your content assets. The second step is to associate or "map" each content resource to one or more of your identified buyer personas. In the final step, you map each content resource to one or more buying process stages on a per buyer persona basis.

To collect and organize this information, I use three spreadsheets, and I've provided example versions below.

Basic Resource Information
The spreadsheet below shows the basic information that I collect about each content asset. Most of the information required for this spreadsheet is self-explanatory, but I've included an "Instructions" row in the example.

Buyer Persona Map

The spreadsheet below is the tool I use to associate specific content resources with buyer personas. When mapping resources to buyer personas, the basic question you ask is whether a resource contains content that will appeal to a given buyer persona. Does the resource focus on the specific problems and challenges facing the buyer persona? Is the resource targeted for the persona's job function and industry.

﻿

You should be able to associate most content resources with at least one buyer persona, but there may be some resources that are so generic that it's just not reasonable to link them to any buyer persona. If you complete your buyer persona map and have any buyer personas with no (or very few) assigned resources, you obviously have a significant gap in your content portfolio.

Buying Stage Map
The final step in the content audit process is to associate your content resources with specific stages of the buying process. When mapping content resources to buying stages, the basic test is whether the resource contains answers for the major questions that a potential buyer will have at that stage of the buying process. The spreadsheet below is the tool I use to perform this step.

In this step, I find it easier to create a separate spreadsheet for each buyer persona. For illustration purposes, I've used a buying process that contains three stages - Discovery, Consideration, and Decision. To create a buying stage map, first select a buyer persona, then go to your buyer persona map and identify all of the content resources that you have assigned to that persona. List these resources in your buying stage map and link each resource to one or more buying stages. Repeat this process until you have a buying stage map for each of your buyer personas. If you don't have content resources for each buying stage for each buyer persona, then you've identified gaps in your content portfolio.

A content audit won't eliminate the work required to develop the content you need, but it will help you prioritize your content development projects.

Sunday, December 2, 2012

Relevant content is a fundamental requirement for any effective content marketing effort. Today's business buyers are incredibly busy, and they view their time as their most precious commodity. Just as important, buyers now have easy access to a wealth of information, and they've come to believe that they can find whatever information they need whenever they need it. Under these circumstances, relevant marketing content is essential for creating and maintaining engagement with potential buyers.

To create relevant marketing content, you obviously need to know who your potential buyers are, and you must understand what makes them tick. You need to have a clear picture of the problems and issues they are facing on the job and how they are trying to deal with those problems and challenges.

The best tool for collecting and organizing information about your potential buyers is a buyer persona. A buyer persona is a detailed description of an actual type of buyer who is involved in decisions to purchase the kinds of products and services you provide. A buyer persona is, therefore, a composite description of a type of buyer, rather than a description of an individual human being. It contains demographic data about the buyer and, more importantly, it describes the buyer's business situation and motivations. Developing a persona for each of your significant buyer types will provide the information you need to create content that will resonate with those buyers.

Before beginning work on your buyer personas, you will need to develop your ideal customer profile. An ICP is a description of the types of organizations that constitute your best prospects. An ideal customer profile includes firmographic information such as industry vertical, company size, and geographic location. Much of this information will be included in the buyer personas, but I've found that it's better to develop the ICP first.

In my last post, I discussed the process for formulating your core customer value propositions. One step in that process is to identify the individuals in the prospect organization who are most affected by the issues or problems that your product or service can address. If you've gone through this process, you'll have a pretty good idea of what individuals (described by job title or job function) are part of the "buying group" for your solution. Identifying the buying group is important because it tells you what buyer personas you need to develop.

A complete B2B buyer persona will contain the following eight components:

Type of business - The type of business the buyer works for. This will be drawn from your ideal customer profile.

Job title/function - The buyer's position in the prospect organization.

Buying role - The role the buyer plays in the purchasing decision process. Common roles include the user buyer and the economic buyer.

Objectives/responsibilities - The major business objectives and job responsibilities of the buyer.

Performance measures - The measures used to evaluate the buyer's job performance.

Strategies - What the buyer does to achieve his/her objectives and fulfill his/her job responsibilities.

Major issues/concerns - This is the heart of the buyer persona. If you can identify what issues and problems are keeping your potential buyers awake a night, you can create compelling marketing content.

Personal attributes - These attributes include the age, gender, education level, and compensation level of your buyer. Obviously, ranges will be used for most of these attributes.

Buyer personas simplify the content development process because they define the target audiences and identify the major issues that your content resources need to address.

In my next post, I'll explain how to use a content audit to determine what specific content resources you need to develop.

Sunday, November 25, 2012

If you want to implement an effective content marketing program in 2013, the place to start is with your customer value propositions. Value propositions are the cornerstone of your entire demand generation strategy, and they provide the foundation for your content marketing efforts. Most of the content resources you publish should be based on, or derived from, the core value propositions you offer.

Value propositions describe how your products and services create value for customers, and their importance cannot be overstated. The 2012 Lead Generation Benchmark Report by MarketingSherpa found that, on average, companies with clear value propositions enjoy lead generation ROI's that are 117% higher than companies without clear value propositions.

Despite their undeniable importance, many companies don't do a good job of identifying their core value propositions or creating content resources that articulate those value propositions in a compelling way. A recent survey of decision makers in B2B companies conducted by the Corporate Executive Board found that only 57% of the "unique benefits" touted by sellers were seen by potential buyers as having enough impact to create a preference for a particular seller. To put it bluntly, you simply cannot create compelling content without first identifying compelling value propositions.

Over the past two decades, I've reviewed hundreds of the "value propositions" used by clients. What I consistently find is that weak value propositions usually fall into one of three categories.

They are too generic.

They focus on product or service features.

They aren't supported by credible evidence.

Not surprisingly, strong value propositions exhibit the opposite characteristics. They describe specific elements of value, they focus on business/economic results or outcomes, and they are supported by credible evidence.

Identifying your core value propositions comes down to answering six fundamental questions about each major type or category of product or service that you offer.

What are all of the significant reasons that people have for purchasing a product or service like mine? What problems or needs motivate the buying decision?

What kinds of organizations are likely to have the problems or needs that underlie these reasons to buy?

Who within the prospect organization is affected by each problem or need? Who has the most to gain if the problem is solved and the most to lose if it isn't?

What specific outcomes are these people seeking?

What features of my solution will produce these desired outcomes?

What will the economic benefits be if these desired outcomes are achieved?

Using these six questions to identify and describe your core value propositions will provide a solid foundation for your content marketing efforts. They help you identify your target market, and they provide the starting point for developing the buyer personas that I'll discuss in my next post. In addition, the answers to these questions will help identify the topics that your content resources should address.

I recently published a white paper that explains how to develop compelling value propositions. If you'd like a copy of this white paper, send an e-mail to ddodd(at)pointbalance(dot)com.

Sunday, November 18, 2012

With less than two months remaining in 2012, you've probably started planning for next year. If your marketing and sales efforts produced the results you hoped for in 2012, that's great! Congratulations on your success! Moving into 2013, you may only need to make minor adjustments to reach your revenue goals for next year.

On the other hand, if your marketing and sales efforts this year have not met your expectations, you may need to make substantial changes in your demand generation program to make 2013 a success.

33% of B2B marketing budgets are now allocated to content marketing, up from 26% in 2011

54% of B2B marketers say they will increase their content marketing spending in 2013

The essence of content marketing is the use of informative and/or entertaining content that is primarily nonpromotional. Good content is tailored for specific types of buyers and for specific buying process stages, and content must be fresh and current to appeal to potential buyers. Therefore, effective content marketing requires a significant number of content resources, and creating those resources can be a daunting job for many companies. In fact, the CMI/MarketingProfs study found that "producing enough content" is now the most difficult challenge facing B2B marketers.

The first thing you must do to create an effective content marketing program is identify what content resources you need. To some extent, of course, this determination will be based on the content distribution channels you choose to use. For example, if you decide to have a company blog, you will obviously need to create blog posts on a regular basis.

Even before you start thinking about content formats, however, you must determine what specific messages your content resources need to communicate. My next three posts will describe a proven process for identifying what content resources your company needs to implement an effective content marketing program.

In my next post, I'll explain how to identify your core customer value propositions. Your value propositions constitute the foundation for your entire content marketing program, so it's obviously critical to get them right at the beginning of your planning process. In the following post, I'll describe how to develop buyer personas. Buyer personas will help ensure that your marketing messages are relevant to potential buyers. The fourth post in this series will describe how to use a content audit to identify where gaps exist in your portfolio of content resources and where your content development efforts need to be focused.

Sunday, November 11, 2012

Marketing and sales "alignment" remains a hot topic among B2B marketing and sales professionals. Many people on "both sides of the aisle" now recognize that successfully finding and winning new customers in today's business environment requires a cohesive and coordinated effort by both marketing and sales.

A growing number of marketing and sales thought leaders are beginning to advocate more dramatic changes in the structure and character of the marketing-sales relationship and/or the techniques used to manage marketing and sales activities. Late last year, the Chartered Institute of Marketing in London published a report arguing that most companies should merge their marketing and sales functions.

Adam Needles, the author of Balancing the Demand Equation, argued in an article for DemandGen Report that marketing and sales need to be more closely aligned against a strategic lead-to-revenue demand process. Commenting on Adam's article, Eric Wittlake wrote in his B2B Digital Marketing blog, "The real implication, although Adam doesn't say it, is that sales and marketing alignment is the wrong objective. Perfectly aligning sales and marketing on either side of the fictitious wall dividing them isn't the answer. Instead, the wall needs to be torn down and sales and marketing need to be integrated through the entire customer experience."

Research firm IDC has also entered the discussion. In addition to research, IDC provides marketing and sales advisory services to technology companies and has produced operational-level scorecards for both marketing and sales for several years. Now, IDC has introduced a Customer Creation Scorecard, which IDC describes as, "Operational KPI's for the Intersection of Sales and Marketing." The new IDC scorecard contains eight key performance indicators, including the combined sales and marketing budget ratio (marketing and sales spending as a percentage of total revenues), the ratio of sales spending to marketing spending, and the marketing investment per total sales headcount.

While IDC doesn't expressly advocate that marketing and sales should be merged, these metrics strongly suggest that managers should treat marketing and sales as components of a single "customer creation" process.

Rich Vansil, IDC's Group Vice President, Executive Advisory Services, has expressed something close to this view. In an article for BtoBOnline, he wrote, "I encourage b2b marketers to think about redefining the footprint of marketing in your organization, and by extension the footprint and impact of the marketing budget. . . Think about the totality of marketing plus sales costs. . . The best opportunity for marketing and sales productivity improvement continues to be at the intersection of these two functions."

Compared to other major trends in B2B marketing and sales, such as the shift to content marketing, the growing use of inbound marketing, and the implementation of marketing automation technologies, moves to integrate marketing and sales are just barely beginning.

As I noted earlier, most of the focus today is on aligning sales and marketing, and only a few companies have addressed the more controversial issue of marketing-sales integration. This is a touchy political issue, and I don't pretend to know how it will play out. There is still a significant amount of cultural and political baggage that separates marketing and sales, and there are legitimate issues regarding the consequences (intended and unintended) of integrating marketing and sales. In addition, no single approach to marketing and sales integration will be optimum for all B2B companies. What I do know, however, is that we can no longer afford to treat marketing and sales as completely separate functional silos.

Sunday, November 4, 2012

My last three posts have discussed how technology can improve the productivity of distributed marketing. By the traditional definition, distributed marketing refers to a marketing model in which both a corporate marketing department and local organizations or business units share responsibility for performing marketing activities. The stereotypical example of a distributed marketing organization is a franchise network, but distributed marketing models are also frequently found in industries like insurance, financial services, and manufacturing.

In my earlier posts, I've described how distributed marketing technologies enhance the productivity of distributed marketing operations. These technologies enable corporate marketers to maintain brand consistency, while simultaneously allowing local marketers to customize materials to fit local conditions. Just as important, these technologies simplify and automate marketing processes and make it easy for relatively inexperienced marketers to develop and execute effective marketing programs.

The main point of this post is that the benefits provided by distributed marketing technologies are not limited to companies with "classic" distributed marketing organizational structures. In fact, the same technological capabilities can also improve the marketing efforts of virtually all kinds of companies. Here's why.

Its now abundantly clear that relevance is an essential component of effective marketing. To cut through the ever-increasing clutter of marketing messages that fill the environment and create meaningful engagement with potential customers, marketing messages and materials must be relevant.

The need to make marketing more relevant is the driving force behind a growing emphasis on "localized" marketing. In a recent survey by the CMO Council, 86% of marketers said they intend to look for ways to better localize marketing content. While most marketers are committed to increasing localized marketing, it is not a simple task. The reality is, it's difficult for marketers in a central marketing department to truly understand what's needed to make marketing effective in diverse local markets.

One solution, of course, is to decentralize marketing, to place the responsibility for making marketing decisions and running marketing programs with individuals who are "closer to the customer." Decentralized marketing is not a new idea, and global enterprises have been decentralizing some marketing functions for years. However, despite the obvious benefits, many companies have been reluctant to decentralize marketing for three primary reasons.

There is often a lack of marketing resources and expertise in branch locations or other local outlets.

Decentralization can lead to duplicative or otherwise inefficient marketing processes.

These are the specific issues that distributed marketing technologies are designed to address.

The important point here is that the capabilities provided by distributed marketing technologies can enable any company to implement a more decentralized approach to marketing without sacrificing brand control or marketing process efficiency.

If your company can benefit from more relevant localized marketing (and virtually all companies can), you should carefully consider how "distributed marketing" technologies could improve your marketing efforts.

Read Part 1 of the series here.
Read Part 2 of the series here.
Read Part 3 of the series here.

Sunday, October 28, 2012

This is the third of four posts dealing with distributed marketing. So far in this series, I've explained what distributed marketing is, described the major challenges facing distributed marketers, and discussed why technology is critical to improving the productivity of distributed marketing.

The diagram below shows that the distributed marketing automation "house" includes two core types of technological capabilities. In my last post, I discussed the marketing asset management component of distributed marketing automation. This post covers the technology tools used to streamline and automate customer engagement management activities and processes.

One of the major challenges facing organizations that rely on distributed marketing is a lack of marketing resources and expertise at the local level. According to research by the Aberdeen Group, the lack of local marketing resources is one of the two biggest challenges for distributed marketing organizations. Because many local entities are small organizations or business units, this is compeltely understandable and probably unavoidable. One result of this lack of resources and expertise is that local partners don't market as frequently or extensively as they should to maximize revenues.

What CEM Technologies Do

The customer engagement management technologies in distributed marketing automation solutions simplify marketing processes and empower local marketers to effectively and efficiently plan, execute, and measure the results of advertising and marketing campaigns and programs.

Customer engagement technologies build on the capabilities of marketing asset management by using customizable templates that enable local marketers to easily create advertisements and other marketing campaign materials. In general, the capabilities provided by customer engagement technologies fall into three broad categories.

Campaign Planning/Management

This category typically includes tools for planning and scheduling marketing campaigns and the tasks required to develop and execute those campaigns.

Campaign Execution

In addition to using templates to create campaign materials, most distributed marketing automation solutions enable local marketers to execute e-mail marketing campaigns either directly or through a link to an e-mail service provider. For direct mail campaigns, the solution will typically enable local marketers to upload mail lists, select recipients from the corporate database, or purchase a mailing list from a third party provider.

Campaign Performance Measurement

Distributed marketing automation solutions typically include tools that enable local marketers to measure the performance of their marketing programs. Some solutions provide corporate marketers access to this performance data, and some will also enable a local marketer to see the results obtained by other local marketers from particular campaigns. This capability enables "best practices" knowledge to be shared across the distributed marketing network.

Benefits of CEM Technologies

The cutomer engagement management technologies in distributed marketing automation solutions make it easy for local marketers to create and run marketing campaigns and programs, and they will usually reduce the cost of those programs. Therefore, these technologies encourage local marketers to run marketing programs more frequently, and increased local marketing will drive higher revenues for both the local entity and the corporate brand owner.

By supporting extensive and cost-effective customization of marketing messages and materials, CEM technologies also enable local marketers to create and run more relevant and therefore more effective marketing programs.

Finally, CEM technologies enable corporate marketers to maintain control of brand messaging and brand presentation, while simultaneously allowing local marketers to develop and run programs that fit local market conditions.

In my next post, I'll discuss why distributed marketing automation technologies can benefit organizations that aren't currently using a "classic" distributed marketing model.

Read Part 1 of the series here.
Read Part 2 of the series here.
Read Part 4 of the series here.﻿

Sunday, October 21, 2012

This is the second of four posts discussing how to improve distributed marketing operations. In my last post, I explained what distributed marketing is, and I described the major challenges facing distributed marketing organizations. I also made the point that you simply cannot maximize the productivity of distributed marketing without the right technology tools, and I introduced the model of distributed marketing automation depicted in the following illustration.

The marketing asset management component of a distributed marketing automation solution is the primary tool for managing the marketing assets and materials used in distributed marketing activities and programs. These materials will typically include marketing collateral documents, print advertisements, promotional items, and point-of-sale materials.

What MAM Technologies Do

Marketing asset management technologies enable corporate marketers to maintain control of brand messaging and brand presentation, while simultaneously allowing local marketers to easily customize marketing materials to fit their specific needs and market conditions. MAM technologies also streamline and automate the process of procuring marketing materials.

The principal features of MAM technologies include:

Central asset repository - A centralized repository, or library, that contains digital versions of the marketing assets used by the brand owner in distributed marketing activities and programs

Online catalog/ordering system - A catalog of marketing materials that local marketers can access via a secure website. The MAM system will also enable local marketers to order (and, if appropriate, pay for) marketing materials.

Customizable templates - Templates of marketing materials that identify which content elements of each item can be modified and which elements cannot be changed. For those elements that can be customized, the template will provide a set of pre-approved customization options. To customize an item, a local marketer simply selects a template and chooses the desired customization options.﻿

Eliminate the internal costs of processing and fulfilling requests for marketing materials

Reduce the time required to process and fulfill requests for marketing materials

Enable corporate marketers to maintain effective control of brand messaging and brand presentation

Simplify and automate the process of creating customized marketing materials, thus lowering customization costs. In addition, MAM technologies expand the degree of customization that can be done, thus allowing local marketers to create more relevant and compelling marketing materials.

Reduce the use of obsolete marketing materials

Reduce the costs of marketing materials obsolescence

Marketing asset management can drive significant improvement in the productivity of distributed marketing. But for a complete solution, you also need tools for automating the creation of marketing campaigns and programs. I'll discuss this aspect of distributed marketing automation in my next post.

Read Part 1 of the series here.
Read Part 3 of the series here.
Read Part 4 of the series here.

Saturday, October 13, 2012

Thousands of companies sell products and services through regional or local outlets. These outlets may be branch offices or company-owned retail stores, or they may be related but independent business organizations such as franchisees or independent agents. In many cases, the local organization or business unit shares responsibility for marketing with the corporate marketing department. When both corporate and local marketers make marketing decisions and perform marketing activities, we call this distributed marketing.

This is the first of four posts about distributed marketing. In this post, I'll describe some of the major challenges facing distributed marketing organizations, and I'll introduce a model that describes the components of an automated distributed marketing system. In the next two posts, I'll describe how the right technology tools can make distributed marketing more productive. The final post will discuss why distributed marketing concepts have become important for organizations that don't use a classic distributed marketing model.

Distributed Marketing Challenges
Organizations that use distributed marketing face the same marketing challenges as everyone else. They must manage communications across a growing number of marketing channels, create and deliver more relevant marketing messages and materials, and improve marketing productivity to maximize the return produced by every dollar invested in marketing.

These challenges are formidable enough on their own, but companies with a distributed marketing model also face challenges that organizations with centralized marketing operations don't typically encounter. In a recent study by the Aberdeen Group, survey participants were asked to identify their top two distributed marketing challenges. By a large margin the top two challenges were:

Maintaining the consistency of our brand (56% of respondents)

Lack of marketing expertise at the local level (48% of respondents)

Because of these and other challenges, distributed marketing operations are often less effective and efficient than they need to be.

A Model for Distributed Marketing Automation
The good news is, technologies now exist that can enable companies to improve both the effectiveness and the efficiency of distributed marketing operations. As a practical matter, you simply can't maximize the productivity of distributed marketing without the right technology tools.

In the marketplace, these technologies can be called marketing asset management, distributed marketing automation, or local marketing automation. We'll refer to these technologies generically as distributed marketing solutions.

Streamline and automate the creation, customization and execution of advertising and marketing programs by local marketers

To enable corporate and local marketers to achieve these objectives, distributed marketing solutions provide a range of functions and capabilities. The "house" diagram below depicts the major components of a distributed marketing solution.

As this diagram shows, a distributed marketing solution is built on a foundation that includes a sound distributed marketing strategy and a solid technology infrastructure. Distributed marketing solutions also contain two critical technology toolsets - marketing asset management and customer engagement management.

In my next post, I'll discuss the role of marketing asset management in a distributed marketing solution.

Sunday, October 7, 2012

One of the most widely-used methods for qualifying B2B sales leads is known by the acronym BANT, which stands for Budget - Authority - Need - Timeline. The basic idea is that you will have a strong sales opportunity if you identify a lead who:

Has a recognized need that your company can address

Has the authority to make the buying decision

Has the budget to purchase the kind of product or service you provide

Has an identified timeline for purchasing the kind of product or service you provide

At first glance, BANT appears to offer an entirely reasonable way to qualify sales leads. It's hard to argue that a lead who meets these four requirements would not be highly qualified.

In reality, however, BANT is no longer an effective way to qualify sales leads for two reasons.

Some of the criteria are all but impossible for an individual "lead" to meet. So, a strict use of the BANT criteria will cause you to ignore many valuable leads.

By the time a lead is fully "BANT-qualified," it's probably too late. Your odds of concluding a sale on your terms are greatly diminished because a competitor has probably established a favored position.

To understand why BANT no longer works well, let's look at each of the criteria.

Budget
B2B companies no longer budget for many purchases in advance. Surveys by DemandGen Report indicate that only 20% - 30% of purchases are budgeted at the beginning of the year. Between 70% and 80% of survey respondents say they evaluate potential solutions, build a business case for immediate adoption, and then obtain spending approval. Therefore, if you require qualified leads to have established budgets, you will obviously miss out on many sales opportunities. Instead of requiring a specific budget, what you have to do is make a judgment call about whether a prospect has the financial ability to purchase your product or service.

Authority
In the 2012 Sales Performance Optimization survey by CSO Insights, 76% of respondents indicated that 3 or more individuals are involved in making the final buying decision. Purchasing by committee is now the norm. In this environment, most of the leads you encounter won't have full purchasing authority, but many of these leads will play a major role in the final buying decision. The right criteria for lead qualification is influence or involvement, not authority.

Need
Of the four BANT criteria, need is still obviously essential. In most cases, if there's no need, there won't be a sale. Even here, however, the idea of "need" is changing. In the past, the goal was to find a lead who recognized the need and understood it. Now we know that a seller can often have greater influence with a lead who does not fully understand the scope or implications of the need, at least at the beginning of the engagement. This can enable the seller to use marketing content and sales messaging to shape and influence how the lead thinks about the need and possible solutions.

Timeline
The primary problem with using timeline for lead qualification is that by the time a prospect has set a timeline for a significant purchase, the prospect has probably completed most of the buying process. In this sense, timelines have become like budgets. Potential buyers identify needs, evaluate potential solutions, and then get spending approval and set a purchase timeline. In fact, a purchase timeline may not be set until after the supplier has been selected.

For many years, BANT provided a useful framework for qualifying sales leads. Given the new realities of B2B buying, however, BANT no longer works for lead qualification. Today, the BANT criteria develop and evolve as the buying process moves forward. But, you can't expect them to exist at the beginning of a prospect relationship.

Sunday, September 30, 2012

The principles described in The Challenger Sale continue to provoke a great deal of discussion among B2B marketing and sales professionals. In this important book, Matthew Dixon and Brent Adamson argue that what business buyers really want from their potential vendors - and by extension their sales reps - are fresh insights about how to improve their business. Dixon and Adamson are affiliated with the Corporate Executive Board, and CEB has make challenger selling a focal point of its sales advisory practice.

I've written about The Challenger Sale in previous posts (here, and here, for example), so I won't go into detail again. Essentially, Dixon and Adamson contend that high-performing sales reps challenge the thinking of prospective customers, make the costs of the status quo visible, and teach prospects how to think about problems and opportunities in new ways.

Earlier this month, Matthew Dixon and Nick Toman wrote a post for The Sales Challenger blog in response to some critics who have contended that challenger selling confuses the roles of sales and marketing. These critics say that communicating insights about new capabilities and benefits is the primary job of marketing.

Dixon and Toman point to new CEB research regarding how sales reps are engaging potential customers. According to this research, average salespeople:

Believe lead generation is the company's responsibility

Assess opportunities based on the clarity of customer needs

Use social media indiscriminately

In contrast, the research found that high-performing sales reps:

Conduct non-traditional due diligence

Personally own lead generation

Lead with insights

Use social media as a channel to deliver insight

Dixon and Toman write, "Put differently, the average rep fills orders by reacting to existing demand; stars sell where customers learn (not just where they buy), shaping demand and teaching customers into the sales funnel. The best sales reps, it turns out, are just as good at marketing as they are at selling."

Dixon and Toman don't appear to believe that sales reps should be completely responsible for lead generation. They point out that the heart of challenger selling is disruptive insights, and they acknowledge that depending on salespeople alone to develop such insights is a "fool's errand." According to the authors, it's marketing's responsibility to "arm" sales reps with the required disruptive insights.

So in a sense, Dixon and Toman are contending that marketing is responsible for identifying and developing the insights, but that sale reps are the primary channel for delivering those insights to potential customers.

With all respect, I disagree.

The reality today, whether we like it or not, is that business buyers are self-educating and avoiding conversations with salespeople until late in the buying process. Other research by CEB has found that the buying process is nearly 60% complete when prospects engage with suppliers, and I've seen similar results from research conducted by SiriusDecisions and others.

As powerful as challenger selling techniques are, they can't be effective if prospects won't talk or meet with you.

More than ever before, effective B2B demand generation requires the combined efforts of both marketing and sales. The real essence of the challenger message is that selling organizations must provide new and valuable insights to potential customers. In today's environment, both sales reps and marketers need to be armed with those insights, and they both must be involved in communicating those insights to potential buyers.

Sunday, September 23, 2012

When B2B companies need to increase sales, managers will usually consider hiring more sales reps. This thinking is understandable because many B2B companies have long relied almost exclusively on their salespeople to find and win new business. Today, however, simply putting "more feet on the street" isn't likely to produce the volume of new sales that managers are looking for, and even if it does, the cost of those new sales is likely to be unacceptably high.

So, before you invest in more sales reps, there are three other steps you should take.

Step 1: Improve Lead Acquisition Marketing

If your marketing programs aren't producing at least 40% - 50% of your qualified sales leads, it's likely that you aren't investing enough in lead acquisition marketing or your marketing programs aren't as effective as they need to be. Marketing must play a larger role in generating new sales leads because in the current environment, business buyers are less receptive to traditional sales prospecting techniques, making such techniques far less effective and efficient.

For most B2B companies, effective lead acquisition marketing should include a mix of inbound and outbound marketing programs. In both cases, persistence is an important key to success. In today's environment, marketers must assume that multiple contacts will be required to entice a potential buyer to respond.

Step 2: Implement a Sound Lead Management Process

Research continues to show that most new sales leads are not ready or willing to engage with a salesperson. We also know, however, that most "qualified but not ready to buy" prospects will eventually buy from someone. Once a new lead is acquired (meaning that the prospect has identified himself/herself and indicated some level of interest in your product or service), the big challenge for B2B companies is to build the relationship with the prospect until he or she is ready to make a buying decision.

A lead management process encompasses all of the marketing and sales activities that you use with prospects "from curiosity to close." The objective of a lead management process is to prevent valuable leads from "falling through the cracks" and out of the marketing/sales funnel. While a comprehensive lead management process includes many components, the three core elements are:

A lead nurturing program that provides prospects relevant, primarily non-promotional information in multiple formats and through multiple channels. The primary objectives of a lead nurturing program are to support prospects throughout the buying process, establish and enhance your credibility, and maintain "mindshare" with prospects until they are ready to have a serious sales conversation.

A lead qualification system that defines appropriate buying process stages and provides a mechanism for estimating where each prospect is in the buying process.

A selling process that's designed to identify legitimate sales opportunities and convert those opportunities into closed deals.

Step 3: Add a Lead Development Representative

Rather than adding more outside sales reps, hire one or more lead development representatives to support your demand generation efforts. Lead development representatives have two primary responsibilities:

They play a major role in the lead qualification process, and they can be primarily responsible for determining when a prospect meets the criteria to be considered a sales-ready lead. When that occurs, the LDR may also be responsible for arranging the first meeting between a prospect and your sales rep.

Lead development reps can perform these functions more efficiently that regular sales reps, and they enable your sales reps to devote more of their time to working with fully qualified prospects who are in the later stages of the buying process.

Hiring more sales reps may be necessary to achieve your growth objectives, but take these three steps first to ensure that you're getting the most out of your existing sales force.

Sunday, September 16, 2012

In 1960, Theodore
Levitt wrote a landmark article for the Harvard Business Review titled “Marketing Myopia.” When it was republished in 2004,
HBR editors said the article, “introduced the most influential marketing idea
of the past half century.”

Levitt’s central
argument was that companies will cease to grow if they define their business too
narrowly – in terms of specific products or services rather than in terms of
customer needs. In a quintessential passage from the article, Levitt explained
the decline of railroads in terms that have become part of the business
lexicon:

“The railroads
did not stop growing because the need for passenger and freight transportation
declined. That grew. The railroads are in trouble today not because that need
was filled by others (cars, trucks, airplanes, and even telephones), but
because it was not filled by the railroads themselves. They let others take
customers away from them because they assumed themselves to be in the railroad
business rather than in the transportation business.”

The “disease”
that Levitt wrote about is still with us, but now, some marketers are also afflicted
with another kind of myopia. This new strain of marketing myopia is
characterized by an almost exclusive focus on marketing communications and the
technologies that support them. As practiced
in many companies today, marketing
means marketing communications and
not much more.

Marketing communications
are certainly important, but marketing also has other responsibilities that are essential
for business success.

For more than four
decades, the term marketing mix has
been used to describe the operational aspects of the marketing
function. The term became popular in the 1960’s after Neil H. Borden published
an article in the Journal of Advertising
Research titled “The Concept of the Marketing Mix.” Borden’s marketing mix
included product planning, pricing, branding, distribution channels, personal
selling, advertising, promotions, packaging, display, servicing, physical
handling, and fact finding and analysis. E. Jerome McCarthy later grouped these
ingredients into the four categories that we know today as the 4 P’s of
marketing – product, price, place, and promotion

The point of this
brief history lesson is that marketing has long had a mandate that is broader
than marketing communications (promotion). Companies can suffer when marketing
ignores these broader responsibilities because, of all the major business
functions, marketing is (or should be) the best suited to relate a company
to its external competitive environment.

So, if you’re a
marketer, give these ideas some thought:

·Marketing
is about communicating your company’s
value propositions, but it must also be about determining what those value propositions will be.

·Marketing
is about communicating the important
features and attributes of your company’s products or services, but it must
also be about determining what
features and attributes your products/services need in order to be attractive to
buyers.

·Marketing
is about communicating your company’s
price-value equation, but it must also be about determining what your company’s pricing strategy
will be.

Marketing
communications will always be a critical part of the marketing function. But
marketers need to keep the other aspects of marketing in mind in order to avoid
a bad case of marketing myopia.

Sunday, September 9, 2012

The dictionary definition of credibility is the quality or power of inspiring belief. Credibility with prospects and customers is critical to the success of any business. Credibility creates trust, and it is one of the attributes that elevates a B2B company from "potential vendor" to "trusted advisor."

It's now clear that marketing content plays a leading role in B2B demand generation. In many cases, a prospect's first impression of your company will be based on the content you publish. To be effective, marketing content must be relevantandcredible to the intended audience.

The relevance of marketing content is primarily determined by what the content communicates. Does it discuss issues that are important to the intended audience? The credibility of a content resource is primarily determined by how the resource communicates the message.

All B2B marketers face a credibility challenge, at least to some extent. The reality is that business buyers have a built-in inclination to distrust marketing content. The credibility gap was clearly shown in recent research by DemandGen Report. In the 2012 Content Preferences Survey, participants were asked to identify the kind of content they gave more credence to.

52% of respondents said peer reviews/user generated content.

33% said content that is authored by a third-party publication or analyst and sponsored by a vendor.

12% said co-branded content.

Only 4% chose content that is branded directly from a vendor.

How to Close the Credibility Gap

Credibility is important for all kinds of marketing content, but it's absolutely critical for content that is used to reach prospects who (a) are in the early stages of their buying process, and (b) are not familiar with your company. Content credibility is essential in this situation because many of these prospects will decide whether to begin or continue a relationship with your company based solely on the credibility of your content.

For these early-stage prospects, the most effective way to establish credibility is to use brand-agnostic content. Brand-agnostic content is content that does not directly or overtly promote your company or your products or services. To create engagement with early-stage prospects, the first requirement is to demonstrate that you are a reliable source of relevant, accurate, insightful, and (mostly) objective information. If your content overtly promotes your company or your products or services, many early-stage prospects will tune you out even if your content also provides valuable information.

Recent research shows just how widespread the dislike of promotional content is among business buyers. In the DemandGen Report survey mentioned earlier, 74% of respondents said that solution providers should "curb the sales messages" in their content resources. In a 2012 survey of technology buyers by UBM TechWeb, 77% of respondents said the biggest mistake technology vendors make is to include too much marketing "fluff" in their content resources.

When prospects enter the consideration/evaluation stage of their buying process, they will want and need to learn more about your company and about the specific features and capabilities of your products or services. That's where promotional content is both necessary and appropriate. Before that, however, promotional content may do more harm than good when it comes to creating engagement with potential customers.

Using brand-agnostic content will undoubtedly be counterintuitive for many B2B marketers. But in today's environment, the reality is that you can sell more by "selling" less.

Sunday, September 2, 2012

Unless you've been stranded on another planet for the past couple of years, you're already aware of the popularity of tablet computers like Apple's iPad. Tech research firm Gartner estimates that 119 million "media tablets" will be sold worldwide in 2012, a 98% increase over the 60 million units sold in 2011. Gartner predicts that worldwide sales will reach 369 million units in 2016.

The explosive growth of tablet (and smartphone) ownership has caused many companies to treat these devices as a marketing channel. Research firms like Forrester have been tracking the growth of "mobile marketing" for the past several years.

Most of the buzz about mobile marketing has involved B2C programs. What has gone less noticed is that tablet computers are quickly becoming an important sales enablement tool in many B2B companies. In a recent poll of its members by the Corporate Executive Board, 75% of respondents said they are already using tablet technology to support sales or plan to begin using tablets within the next 12 months.

Consider just a few examples:

Earlier this year, InformationWeek reported that Level 3 Communications, a telecom and network services company, had just given iPads to its 1,300 North American salespeople and sales engineers.

In early 2011, cbsnews.com reported that AstraZeneca and Novartis are among several pharmaceutical companies that have acquired iPads for some of their outside salespeople.

In late 2010, Medtronic, Inc., a medical devices company, made news when it purchased 4,500 iPads for its sales and marketing team.

It's easy to understand why tablets are great sales tools. They enable sales reps to deliver interactive presentations, and with the right applications, they can allow salespeople to access CRM systems and other internal sales resources. Because of their size, weight, and design, tablets are easy to use for one-on-one presentations, and many tablets can be connected to projectors or big-screen TVs, so group presentations are easy to make.

Sales reps also love tablets because they make life easier. For example, before they received iPads, Medtronic's salespeople routinely carried about 25 pounds of printed product literature on sales calls. The iPads make most of the printed collateral unnecessary, and they weigh less than two pounds.

The benefits of using tablets to support sales efforts are obvious, but it's important to realize that they also create new challenges for marketers. To maximize the potential of tablet-based sales presentations, companies need to provide salespeople new kinds of marketing content. B2B marketers have long been responsible for supporting salespeople with marketing collateral documents such as company brochures, product brochures, and customer case studies. These collateral materials have traditionally been printed documents that sales reps would carry on sales calls.

With tablet computers, these traditional marketing collateral documents can be transformed into rich, interactive marketing content. For example, a product brochure can include links to schematic drawings or audio/visual files that show the product in use. A company brochure could contain a video message from the CEO or a brief interview with an industry analyst.

Developing this kind of rich, interactive content is primarily a marketing function, but marketers must work closely with front-line salespeople to ensure that the content will be relevant and compelling for prospects and easy for sales reps to use.

So far, the use of tablets for sales presentations has primarily involved large enterprises. Given the significant benefits, however, that's about to change. Therefore, if you're a marketer in a large or midsize B2B company, you should be thinking now about how you can develop tablet-friendly content and how you can put that content in the hands of your sales reps.

Sunday, August 26, 2012

About once a month, I'm publishing a post that shares insights I've discovered at another blog. This month, the insight comes from ViewPoint l The Truth About Lead Generation. The primary author of this blog is Dan McDade whose firm (PointClear) provides lead generation services to B2B companies.

Earlier this year, McCade wrote a series of three posts discussing The Cost-Per-Lead Fallacy in Measuring B2B Lead Generation Investments. Here are the links to the three posts:

All of these posts contain excellent information, and I highly recommend them. Here are a few highlights.

McDade argues that it's a big mistake to use cost-per-lead as the primary basis for managing and measuring B2B lead generation investments. As he puts it, "This metric rewards the wrong behavior, delivers low-value sales leads, and fails to deliver the kind of business intelligence needed to drive marketing ROI now and in the future."

McDade goes on to identify several specific shortcomings of cost-per-lead as the primary lead generation metric.

Cost-per-lead focuses on costs rather than on the value or ROI produced by marketing efforts.

In most companies, cost-per-lead is used primarily to measure the cost of early-stage leads. Rarely is cost-per-lead used for late-stage leads such as "sales accepted" leads or "sales qualified" leads. When cost-per-lead is used only for early-stage leads, it is not an effective way to measure outcomes.

I completely agree with most of Dan McDade's criticisms of cost-per-lead, and I would add one of my own. There is nothing inherently wrong with measuring cost-per-lead, but problems will arise if cost-per-lead is misused or used in isolation.

In my last two posts (here and here), I discussed how to calculate the value of leads at every stage of the demand generation process. If you know the value of your leads at multiple stages, then measuring the cost of leads at those same stages can provide useful information about the performance of your lead generation activities and programs. If you don't know the value of your leads, measuring the cost of your leads is mostly a waste of time. The information you generate won't enable you to make better decisions, and it may lead you to make choices that will do more harm than good.

Sunday, August 19, 2012

In my last post, I discussed why B2B marketing and sales professionals need to have a clear and accurate understanding of lead value. I also described the first two steps of a four-step process for determining the value of sales leads - estimating the lifetime value of a new customer and calculating the maximum amount that you should invest to acquire a new customer. In this post, I'll cover the final two steps of the valuation process and describe how to use this data to determine the value of sales leads at any desired stage of the demand generation pipeline.

To illustrate how this process works, I'm using an example of a company that provides marketing asset management (MAM) solutions to corporate customers. So far, we have calculated the customer lifetime value of a new MAM customer ($135,000) and the maximum amount the company should invest to acquire a new MAM customer ($117,000).

Identify Lead Stages and Conversion Rates

The next step in the process is to decide what lead stages you want to use in your lead value model and identify the rates at which leads convert from one stage to the next. To be absolutely clear, the "lead value" we are calculating is equal to the maximum amount that a business should spend to acquire or develop a sales lead at a given lead stage. With this approach, the value of a lead is a function of two factors - the maximum amount you should spend to acquire a new customer and the rate at which leads at a given stage convert to become customers.

To illustrate this process, lets add some facts to the example we used in the last post. Companies define lead stages in a variety of ways, but one of the most widely-used frameworks is the demand waterfall developed by marketing and sales research firm SiriusDecisions. We'll assume that our hypothetical MAM company uses this framework to describe its lead stages. The table below shows the major stages that are included in the SiriusDecisions framework.

Stage Customeralue
This table also shows the rates at which leads "convert" from one lead stage to the next. These conversion rates were developed by SiriusDecisions, and they describe the conversion rates of an average-performing B2B company. The table shows that 4.4% of inquires will become marketing qualified leads, 66% of marketing qualified leads will become sales accepted leads, 49% of sales accepted leads will become sales qualified leads, and 20% of sales qualified leads will become new customers. Your conversion rates will differ those shown in the table, and it's critical to use your rates for calculating the value of your sales leads.

Calculate Lead Value

To calculate lead value, you first need to determine how many leads are required at each of your lead stages to produce one new customer. These amounts will depend on your lead conversion rates. For example, the above table shows that the conversion rate for sales qualified leads to new customers is 20%. Therefore, it takes 5 sales qualified leads to result in the acquisition of one new customer (1/.20). Likewise, the table shows that the conversion rate for sales accepted leads to sales qualified leads is 49%. So, it takes 10.2 sales accepted leads to produce 5 sales qualified leads (5/.49). This also means that it takes 10.2 sales accepted leads to produce one new customer.

Once you've determined now many leads are required at each lead stage to produce one new customer, calculating the lead value is easy. You simply divide your maximum allowable investment for one new customer by the number of leads required to produce one new customer. As the above table shows, the value of sales leads for our example MAM company are as follows:

Sales Qualified Leads = $23,400 ($117,000/5)

Sales Accepted Leads = $11,466 ($117,000/10.2)

Marketing Qualified Leads = $7,568 ($117,000/15.5)

Inquiries = $333 ($117,000/351.4)

This model clearly demonstrates that leads increase significantly in value as they move through the demand generation pipeline. In our example, a late-stage Sales Qualified Lead is about 70 times more valuable than an early-stage Inquiry. This dramatic increase in value provides strong justification for investing in effective lead nurturing programs that will move prospects through the pipeline.

I've recently published a white paper that explains the process for calculating lead value. If you'd like a copy of this paper, send an e-mail to ddodd(at)pointbalance(dot)com.

Sunday, August 12, 2012

Every day, marketing and sales professionals in thousands of B2B companies make significant investments to acquire and develop sales leads. The ultimate objective is to grow revenues and profits by winning new customers. Unfortunately, these investment decisions are often made without a clear and accurate understanding of how valuable leads actually are. When marketing and sales leaders don't know the true value of their sales leads, they can invest too little and miss out on profitable new revenues, or they can invest too much and acquire customers that are unprofitable.

Knowing the true value of sales leads is particularly important for B2B companies with long and complex demand generation cycles. In these situations, the purchase decision is the end result of a buying process that contains multiple steps and often extends over a period of several months. Demand generation investments must be made to acquire new leads, and additional investments are required to move those leads through the revenue pipeline. To manage demand generation spending effectively, you need to know the value of leads at various stages of the process.

Determining the value of sales leads is a four-step process. In this post, I'll discuss the first two steps, and I'll cover the last two steps in my next post.

Estimate Customer Lifetime Value

The first step in determining the value of sales leads is to estimate the value of a new customer for your business. Customer value establishes the ceiling for how much you should invest to acquire a new customer because new customers will contribute to profitable growth only if the value they create exceeds the costs you incur to acquire them. For this purpose, value means customer lifetime value, which can be defined as the present value of the total profits that a company expects to earn from a customer over the full duration of the customer relationship.

There are several methods for calculating customer lifetime value. One of the more simple formulas is:

We can use a simple example to illustrate how the formula works. Suppose that your comany sells marketing asset management (MAM) solutions to corporate customers. The average new MAM customer produces annual gross revenues of $100,000 and an annual gross profit of $30,000. Your customer retention rate for new MAM customers is 90%, and your discount rate is 10%. If we insert these values into the formula, the calculation would be:

On these facts, therefore, each new MAM customer that you acquire is worth $135,000 to your company.

Calculate the Maximum Allowable Investment

As I noted earlier, the value of a new customer sets the ceiling for how much you can spend to acquire that customer without diluting company profits. However, when customer acquisition costs are equal to customer lifetime value, your company will not earn a return on your acquisition investment. Therefore, it's important to determine how much you can spend to acquire a new customer and earn an acceptable return on your acquisition investment. I call this the maximum allowable investment.

The formula for calculating the maximum allowable investment is:

Maximum allowable investment = CLV/(1+ROI Threshhold)

In this formula, CLV is the customer lifetime value, and ROI Threshhold is your minimum acceptable ROI on demand generation investments. If we assume that your ROI Threshhold is 15%, the maximum allowable investment would be calculated as follows:

So, in this example, the most you should spend to acquire a new MAM customer is approximately $117,000.

In my next post, I'll discuss the final two steps in the process for calculating lead value. I've recently published a white paper that explains this process in greater detail. If you'd like a copy of this white paper, send an e-mail to ddodd(at)pointbalance(dot)com.

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About Me

I've been advising and supporting small and mid-sized B2B companies for over twenty-five years. I work with clients to evaluate major strategic issues and initiatives, develop effective business and marketing strategies, and implement operational improvement programs.